10.2 Counterparty Risks

1. Oracle Failure:

• Oracles play a crucial role in accurately pricing insurance-backed NFTs and claims by providing external data such as market prices, economic indicators, and other relevant external factors. A malfunction or manipulation of these oracle systems can lead to inaccurate risk assessments, mispricing of premiums, or erroneous claims payouts.

• The stability of arrUSD depends on real-time market conditions, which rely on the reliability of data feeds. Errors in data collection, delays, or discrepancies in oracle updates may lead to mispricing of premiums or incorrect payout calculations.

2. Smart Contract Risks:

• Smart contract vulnerabilities remain a persistent concern, despite extensive code audits. Bugs or flaws in smart contract code could potentially lead to security breaches, resulting in the loss of funds, failure to execute transactions, or other unintended consequences.

• Despite InsuranceDAO.World undergoing regular security audits, the complexity of smart contracts means there is no guarantee that unforeseen exploits or vulnerabilities will not arise.